Walton Company measured its quality costs for the past two years and summarized those costs using the four categories shown below: Prevention costs Appraisal costs Internal failure costs External failure costs Required: Last Year This Year $ 389,100 $ 669,500 $ 467,300 $ 545,000 $ 837,400 $ 465,000 $ 1,100,000 $ 612,000 1. Calculate the total cost of quality last year and this year. 2. For last year, calculate the cost in each of the four categories as a percent of the total cost of quality. 3. For this year, calculate the cost in each of the four categories as a percent of the total cost of quality. 4-a. Calculate the change in total cost of quality over the two-year period. 4-b. Is performance trending in a favorable or unfavorable direction? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4A Required 4B Calculate the total cost of quality last year and this year. Total cost of quality Last Year This Year

Walton Company measured its quality costs for the past two years and summarized those costs using the four categories shown below: Prevention costs Appraisal costs Internal failure costs External failure costs Required: Last Year This Year $ 389,100 $ 669,500 $ 467,300 $ 545,000 $ 837,400 $ 465,000 $ 1,100,000 $ 612,000 1. Calculate the total cost of quality last year and this year. 2. For last year, calculate the cost in each of the four categories as a percent of the total cost of quality. 3. For this year, calculate the cost in each of the four categories as a percent of the total cost of quality. 4-a. Calculate the change in total cost of quality over the two-year period. 4-b. Is performance trending in a favorable or unfavorable direction? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4A Required 4B Calculate the total cost of quality last year and this year. Total cost of quality Last Year This Year

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter14: Quality And Environmental Cost Management

Section: Chapter Questions

Problem 13E: Gagnon Company reported the following sales and quality costs for the past four years. Assume that...

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At the end of 20x5, Bing Pharmaceuticals began to implement an environmental quality management program. As a first step, it identified the following costs in its accounting records as environmentally related for the calendar year just ended: Required: 1. Prepare an environmental cost report by category. Assume that total operating costs are 150,000,000. 2. Use a pie chart to illustrate the relative distribution percentages for each environmental cost category. Comment on what this distribution communicates to a manager.
Muskogee Company had sales of 60,000,000 in 20x1. In 20x5, sales had increased to 75,000,000. A quality improvement program was implemented at the beginning of 20x1. Overall conformance quality was targeted for improvement. The quality costs for 20x1 and 20x5 follow. Assume any changes in quality costs are attributable to improvements in quality. Required: 1. Compute the quality cost-to-sales ratio for each year. Is this type of improvement possible? 2. Calculate the relative distribution of costs by category for 20x1. What do you think of the way costs are distributed? (A pie chart or bar graph may be of some help.) How do you think they will be distributed as the company approaches a zero-defects state? 3. Calculate the relative distribution of costs by category for 20x5. What do you think of the level and distribution of quality costs? (A pie chart or bar graph may be of some help.) Do you think further reductions are possible? 4. The quality manager for Muskogee indicated that the external failure costs reported are only the measured costs. He argued that the 20x5 external costs were much higher than those reported and that additional investment ought to be made in control costs. Discuss the validity of his viewpoint. 5. Suppose that the manager of Muskogee received a bonus equal to 10 percent of the quality cost savings each year. Do you think that gainsharing is a good or a bad idea? Discuss the risks of gainsharing.
Evans Company had total sales of 3,000,000 for fiscal 20x5. The costs of quality-related activities are given below. Required: 1. Prepare a quality cost report, classifying costs by category and expressing each category as a percentage of sales. What message does the cost report provide? 2. Prepare a bar graph and pie chart that illustrate each categorys contribution to total quality costs. Comment on the significance of the distribution. 3. What if, five years from now, quality costs are 7.5 percent of sales, with control costs being 65 percent of the total quality costs? What would your conclusion be?
In response to intense foreign competition, Florex Company has taken steps to improve the quality of its products. A summary of its quality costs (in thousands) over the past two years is given below: Inspection Quality engineering Depreciation of test equipment Rework labor Costs (in thousands) This Year Last Year $ 630 $1,218 $ 630 $ 420 $ 420 $ 588 $ 1,260 Statistical process control Cost of field servicing Supplies used in testing Systems development Warranty repairs Net cost of scrap Product testing Product recalls Disposal of production defects Sales have been flat over the past few years, at $84,000,000 per year. $0 $ 1,470 $ 42 $ 840 $ 3,570 $ 210 $ 840 $ 1,680 $ 420 $ 2,940 $ 630 $ 1,092 $ 42 $ 1,050 $ 1,512 $1,050 $ 1,260 $ 924 $ 420 Required: 1. Prepare a quality cost report for this year and last year. Note: Enter amount values in thousands. Round your percentage answers to 2 decimal places (i.e 0.1234 should be entered as 12.34).
How do you conclude calculating measuring quality cost to a percentage for the total cost of quality. Percentage cost $357,000. appraisal cost $445,000 internal failure cost $779,000 external failure cost $1,100,00.
Cost of Quality and Value-Added/Non-Value-Added Reports for a Service Company Three Rivers Inc. provides cable TV and Internet service to the local community. The activities and activity costs of Three Rivers are identified as follows: a. Identify the cost of quality classification for each activity and whether the activity is value-added or non-value-added. Value-Added/ Non-Value-Added Classification Quality Control Activities Billing error correction Cable signal testing Reinstalling service (installed incorrectly the first time) Repairing satellite equipment Repairing underground cable connections to the customer Replacing old technology cable with higher quality cable Replacing old technology signal switches with higher quality switches Responding to customer home repair requests Training employees Total activity cost Activity Cost $35,400 108,800 76,000 34,000 23,000 151,400 173,000 42,400 36,000 $680,000 Quality Cost Classification Max
For the current year, prevention costs are what percentage of sales? For the current year, appraisal costs are what percentage of sales? 3.333% 0.833% 0.500% 0.875% If quality costs had been reduced to 2.5 percent of sales in the current year, profits would have increased by
Gagnon Company reported the following sales and quality costs for the past four years. Assume that all quality costs are variable and that all changes in the quality cost ratios are due to a qual- ity improvement program. Quality Costs as a Percent of Revenues Year Sales Revenues 1 S20,000,000 25% 22,000,000 22,000,000 22 3 18 4 24,000,000 14 Required: 1. Compute the quality costs for all four years. By how much did net income increase from Year 1 to Year 2 because of quality improvements? From Year 2 to Year 3? From Year 3 to Year 4? 2. The management of Gagnon Company believes it is possible to reduce quality costs to 2.5 percent of sales. Assuming sales will continue at the Year 4 level, calculate the additional profit potential facing Gagnon. Is the expectation of improving quality and reducing costs to 2.5 percent of sales realistic? Explain. 3. Assume that Gagnon produces one type of product, which is sold on a bid basis. In Years 1 and 2, the average bid was $400. In Year 1,…
Cost of Quality and Value-Added/Non-Value-Added Reports for a Service Company Three Rivers Inc. provides cable TV and Internet service to the local community. The activities and activity costs of Three Rivers are identified as follows: a. Identify the cost of quality classification for each activity and whether the activity is value-added or non-value-added. Value-Added/ Activity Quality Cost Non-Value-Added Quality Control Activities Cost Classification Classification Billing error correction $46,200 Cable signal testing 115,500 Reinstalling service (installed incorrectly the first 99,300 time) Repairing satellite equipment 46,200 Repairing underground cable connections to the 30,000 customer Replacing old technology cable with higher quality 158,500 cable Replacing old technology signal switches with 181,100 higher quality switches Responding to customer home repair requests 55,500 Training employees 37,700 Total activity cost $770,000
Nabors Company had actual quality costs for the year ended June 30, 20x5, as given below. At the zero-defect state, Nabors expects to spend 375,000 on quality engineering, 75,000 on vendor certification, and 50,000 on packaging inspection. Assume sales to be 25,000,000. Required: 1. Prepare a long-range performance report for 20x5. What does this report tell the management of Nabors? 2. Explain why quality costs still are present for the zero-defect state. 3. What if Nabors achieves the zero-defect state reflected in the report? What are some of the implications of this achievement?
The controller of Emery, Inc. has computed quality costs as a percentage of sales for the past 5 years (20X1 was the first year the company implemented a quality improvement program). This information is as follows: Required: 1. Prepare a trend graph for total quality costs. Comment on what the graph has to say about the success of the quality improvement program. 2. Prepare a graph that shows the trend for each quality cost category. What does the graph have to say about the success of the quality improvement program? Does this graph supply more insight than the total cost trend graph does? 3. Prepare a graph that compares the trend in relative control costs versus relative failure costs. Comment on the significance of this trend.
Kang Company reported sales of 3,240,000 in 20x5. At the end of the calendar year, the following quality costs were reported: Required: 1. Prepare a quality cost report. 2. Prepare a graph (pie chart or bar graph) that shows the relative distribution of quality costs, and comment on the distribution.